American Eagle Group Inc. Reports Special Charge Resulting A Net Loss for 1995; 1995 Results Before Special Charge Were $7.5 Million or $1.05 Per Share.DALLAS--(BUSINESS WIRE)--Feb. 27, 1996--American Eagle Group, Inc. announced that in the fourth quarter of 1995 it recorded a special charge to earnings of $20.6 million after tax, or $2.92 per share, for certain discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: lines and classes of business and increased reserves for incurred but not reported Incurred but not reported (IBNR) is a term in common use in general insurance. When a policy of general insurance is written it will typically cover a 12 month period from inception of the policy. (IBNR IBNR Incurred But Not Reported IBNR Interesting But Not Relevant ) losses and unearned premiums, resulting in a net loss of $13.1 million, or $1.87 per share, for the full year. Included in the 1995 net loss were catastrophe losses of $0.65 million, or $0.09 per share. Absent the fourth quarter non-cash special charge, net income for the year would have been approximately $7.5 million, or $1.05 per share. As a result of the special charge, net book value declined in 1995 by $1.54 per share to $7.58 per share at December 31, 1995. Approximately $8.9 million of the special charge results from additional case reserves and related costs for three segments of the commercial general aviation business in which certain classes of coverage have been discontinued. Approximately $.7 million of the special charge results from additional case reserves and related costs for the auto dealer program, from which the Company previously announced its withdrawal. The remainder of the special charge, approximately $11.0 million, results from an increase in IBNR and unearned premium reserves, which includes reserves for the discontinued lines and classes of business. Of the increase in IBNR and unearned premium reserves, $7.1 million is an increase in general aviation reserves, and $3.9 million is an increase in property and casualty reserves. Based upon the continued assessment of the commercial general aviation exposures, a number of additional underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. actions have been implemented during the fourth quarter of 1995. American Eagle has discontinued writing coverages for the flying club segment and certain classes in the instruction and rental and the charter segments. These three segments together represent less than 10 percent of the total general aviation book of business. American Eagle has also instituted a number of other underwriting policy and management changes to enhance risk selection, pricing and underwriting control. American Eagle's bank credit agreement has been amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. to eliminate the effect of the special charge on financial covenants, thus preventing any technical default of those covenants. M. Philip Guthrie, Chairman and Chief Executive Officer, stated, "While we have experienced an extremely disappointing year financially, we believe that promptly and decisively addressing the issues that led to this financial result will allow us to proceed in 1996 focused on profitable operations. We remain very pleased with the pleasure and business aircraft and the airport liability segments of our business, which together account for approximately one-half of our general aviation revenues. We have discontinued troublesome classes in three segments of our commercial aviation business, which represent less than 10 percent of our total general aviation revenues, but generated a disproportionately dis·pro·por·tion·ate adj. Out of proportion, as in size, shape, or amount. dis  pro·por high percentage of our general aviation losses."Our withdrawal from the franchised new auto dealer program, the smallest of the three property and casualty programs, continues on schedule. "No insurance company can guarantee that its IBNR reserves are adequate, and we are no exception. But we have always tried to realistically address reserve requirements Reserve Requirements Requirements regarding the amount of funds that banks must hold in reserve against deposits made by their customers. This money must be in the bank's vaults or at the closest Federal Reserve Bank. , and that is the reason we have taken the steps that we're announcing today. We believe that these steps appropriately address the underwriting and financial issues that we saw arising in the third and fourth quarters of 1995, when we announced that a special reserve may be prudent." As a result of the special charge, the net loss for 1995 was $13.1 million compared to net income of $7.1 million in 1994. The operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. , which excludes realized investment gains of $0.3 million (after federal income taxes) in 1995 and an insignificant amount in 1994, was $13.4 million, or $1.90 per share in 1995, compared to operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $7.2 million, or $1.26 per share in 1994. Earned premiums Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. , net of reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. , increased 24 percent to $102.4 million in 1995, from $82.7 million in 1994. The combined ratio, including the special charge, was 125.2 percent in 1995, compared to 92.3 percent in 1994, as a result of a 25.1 point increase in the loss ratio and a 7.8 point increase in the expense ratio. Absent the special charge, net income for 1995 was $7.5 million, or $1.05 per share; operating income was $7.2 million, or $1.02 per share; and the combined ratio was 94.9 percent. As a result of the special charge, the net loss for the fourth quarter of 1995 was $18.3 million, or $2.60 per share, compared to net income of $2.7 million, or $0.39 per share, for the fourth quarter of 1994. There were no significant realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. or losses in the fourth quarters of 1995 or 1994. Earned premiums, net of reinsurance, for the fourth quarter of 1995 increased 31 percent to $30.0 million from $22.9 million in the comparable period in 1994. The fourth quarter combined ratio, including the special charge, was 196.5 percent in 1995, compared to 85.0 percent in 1994. Absent the special charge, net income for the fourth quarter of 1995 was $2.3 million, or $0.32 per share; operating income was $2.3 million, or $0.32 per share; and the combined ratio was 93.5 percent. The common stock of American Eagle Group, Inc. trades on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the symbol "FLI FLI - Flash Lights Impressively. ." American Eagle Group, Inc. is an insurance holding company that, through its subsidiaries, markets and underwrites specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. property and casualty coverages in selected niche markets A niche market also known as a target market is a focused, targetable portion (subset) of a market sector. By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. . These markets include general aviation, local and intermediate haul trucking, selected artisan contractors and private yachts. The company's business is organized in three divisions: the Aviation Division, headquartered in Dallas, Texas “Dallas” redirects here. For other uses, see Dallas (disambiguation). The City of Dallas (pronounced [ˈdæl.əs] or [ˈdæl. ; the Property & Casualty Division, headquartered in Sacramento, California “Sacramento” redirects here. For other uses, see Sacramento (disambiguation). Sacramento is the capital of the State of California and the county seat of Sacramento County. ; and the Marine Division, headquartered in Baltimore, Maryland "Baltimore" redirects here. For the surrounding county, see Baltimore County, Maryland. For other uses, see Baltimore (disambiguation). Baltimore is an independent city located in the state of Maryland in the United States. . -0- American Eagle Group, Inc. Fourth Quarter 1995 Earnings (In thousands, except per share data)
Three Months Ended Year Ended
December 31 December 31
----------- -----------
1995 Before 1995 Before
Special Special
1994 1995 Charge 1994 1995 Charge
---- ---- ------ ---- ---- ------
Earned premiums $22,854 $30,032 $34,032 $82,725 $102,447 $106,447
Operating income 2,749 (18,343) 2,249 7,164 (13,394) 7,198
Net realized invest-
ment gains (losses),
after federal
income tax (AFIT) (2) 25 25 (21) 318 318
Net income 2,748 (18,318) 2,274 7,143 (13,076) 7,516
Preferred stock
dividends 25 25 25 555 98 98
Net income available
for common
stockholders 2,723 (18,343) 2,249 6,588 (13,174) 7,418
Per Share Data:
---------------
Operating income $0.39 ($2.60) $0.32 $1.26 ($1.90) $1.02
Net income 0.39 (2.60) 0.32 1.26 (1.85) 1.07
Net income available
for common
stockholders 0.39 (2.60) 0.32 1.16 (1.87) 1.05
Weighted average
shares 7,005 7,051 7,051 5,684 7,053 7,053
Underwriting Ratios (GAAP):
---------------------------
Losses and
LAE ratio 54.6% 151.0% 53.3% 63.7% 88.8% 59.9%
Expense ratio 30.4% 45.5% 40.2% 28.6% 36.4% 35.0%
Combined ratio 85.0% 196.5% 93.5% 92.3% 125.2% 94.9%
CONTACT: American Eagle Group Inc. M. Philip Guthrie, 214/448-1460 Richard M. Kurz, 214/448-1477 |
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